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1 JOINT STATEMENT OF JOHN F. WALSH UNITED STATES ATTORNEY DISTRICT OF COLORADO AND THOMAS M. HARRIGAN DEPUTY ADMINISTRATOR DRUG ENFORCEMENT ADMINISTRATION BEFORE THE COMMITTEE ON OVERSIGHT & GOVERNMENT REFORM SUBCOMMITTEE ON GOVERNMENT OPERATIONS U.S. HOUSE OF REPRESENTATIVES FOR A HEARING EXAMINING THE DEPARTMENT OF JUSTICE S STRATEGY TO ENFORCE AND PROSECUTE CERTAIN MARIJUANA RELATED CRIMES PRESENTED ON MARCH 4, 2014

2 Joint Statement of John F. Walsh, United States Attorney, District of Colorado and Thomas M. Harrigan, Deputy Administrator, Drug Enforcement Administration United States Department of Justice Before the Committee on Oversight & Government Reform Subcommittee on Government Operations March 4, 2014 Good afternoon Chairman Mica, Ranking Member Connolly, and distinguished Members of the Committee. We are pleased to speak with you about the guidance that the Department issued to all United States Attorneys regarding marijuana enforcement efforts and the guidance that the Department recently issued to all United States Attorneys regarding marijuana-related financial crimes. The marijuana enforcement guidance issued on August 29, 2013 (August 29th memorandum), advises federal prosecutors in the exercise of their prosecutorial discretion to focus on and continue enforcement of federal priorities, such as preventing sales of marijuana by criminal enterprises, preventing violence and the use of firearms in the cultivation and distribution of marijuana, preventing distribution to minors, and preventing the cultivation of marijuana on public lands priorities that we historically have focused on for many years and also notes that we will continue to rely on state and local authorities to effectively enforce their own drug laws as we work together to protect our communities. The recent guidance regarding marijuana-related financial crimes, issued by the Department on February 14, 2014 (February 14th memorandum), addresses public safety issues posed by these state-licensed and regulated cash driven businesses. I. Introduction As you know, the relevant federal statute, the Controlled Substances Act of 1970 (CSA), among other prohibitions, makes it a federal crime to possess, grow, or distribute marijuana, and to open, rent, or maintain a place of business for any of these purposes. Financial transactions involving proceeds generated by marijuana-related conduct can form the basis for prosecution under money laundering statutes, the unlicensed money remitter statute, and the Bank Secrecy Act (BSA). For many years, all 50 states had uniform drug control laws or similar provisions that mirrored the CSA with respect to their treatment of marijuana and made the possession, cultivation, and distribution of marijuana a state criminal offense. With such overlapping statutory authorities, the federal government and the states have worked as partners in the field of drug enforcement. Federal law enforcement has targeted large-scale drug traffickers and organizations, while state and local authorities generally have focused their enforcement efforts, under their state laws, on more localized and localized drug activity. 1

3 Starting with California in 1996, several states have authorized the cultivation, distribution, possession, and use of marijuana for medical purposes, under state law. Colorado authorized the use of marijuana for medical purposes in Today, twenty-one states and the District of Columbia legalize marijuana use for medical purposes under state law, including six states that enacted medical marijuana legislation in And in 2012, voters in Colorado and Washington approved state constitutional changes legalizing recreational marijuana under state law and establishing state regulatory systems for recreational marijuana. Throughout this time period, the Department of Justice has continued to work with its state and local partners, but focused its own efforts and resources on priorities that are particularly important to the federal government. The priorities that have guided our efforts are: Preventing the distribution of marijuana to minors; Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels; Preventing the diversion of marijuana from states where it is legal under state law in some form to other states; Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; Preventing violence and the use of firearms in the cultivation and distribution of marijuana; Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and Preventing marijuana possession or use on federal property. Examples of our efforts have included cases against individuals and organizations that were using the state laws as a pretext to engage in large-scale trafficking of marijuana to other states; enforcement against those who were operating marijuana businesses near schools, parks, and playgrounds; and enforcement against those who were wreaking environmental damage by growing marijuana on our public lands. In the District of Colorado, the U.S. Attorney s Office has targeted enforcement actions against marijuana businesses and residential grow sites near schools. The U.S. Attorney s Office warned these businesses through a letter campaign that their actions violated federal law. Every business that received a letter closed or relocated voluntarily. In one criminal action, a defendant was convicted in 2011 for creating a residential grow house of over 200 marijuana plants within 1000 feet of a public elementary school. In addition, we have actively investigated and prosecuted cases involving international smuggling and interstate shipment of marijuana, marijuana growing operations where firearms and violence are involved, marijuana cultivation on public lands, and cases with potential organized crime involvement in 2

4 marijuana businesses. In these instances and historically, the Department has not devoted our finite resources to prosecuting individuals whose conduct is limited to possession of marijuana for personal use on private property. As these enforcement efforts reflect, the Department is committed to enforcing the Controlled Substances Act by focusing its resources on these key federal priorities and by working closely with our state and local law enforcement partners. Marijuana is the most widely available and commonly abused illicit drug in the United States. According to the 2014 National Drug Threat Survey, 80 percent of responding agencies reported that marijuana availability was high in their jurisdictions. Availability increases are due to large-scale marijuana importation from Mexico and Canada, as well as increasing domestic indoor grows and marijuana cultivation in states that have legalized marijuana or passed medical marijuana initiatives. Abuse among adolescents is increasing and the medical consequences of marijuana abuse are rising. Further, marijuana concentrates, produced with new and dangerous extraction methods that elevate their THC content, are an increasing concern to law enforcement and public health officials. II. The Department s Updated Marijuana Enforcement Guidance In November 2012, voters in Colorado and Washington State passed ballot initiatives that legalized, under state law, the possession of small amounts of marijuana, and made Colorado and Washington the first states to provide for the regulation of marijuana production, processing, and sale for recreational purposes. The Department of Justice has reviewed these laws in the context of our enforcement priorities. On August 29, 2013, the Department notified the Governors of Colorado and Washington that we were not at this time seeking to preempt their states laws. We advised the Governors that we expected their states to implement strong and effective regulatory and enforcement systems to fully protect against the public health and safety harms that are the focus of our marijuana enforcement priorities, and that the Department would continue to investigate and prosecute cases in Colorado and Washington in which the underlying conduct implicated our federal interests. The Department reserved its right to challenge the state laws at a later time, in the event any of the stated harms do materialize either in spite of a strict regulatory scheme, or because of the lack of one. That same day, the Department issued a guidance memorandum to all United States Attorneys directing our prosecutors to continue to fully investigate and prosecute marijuana cases that implicate any one of our eight federal enforcement priorities. This memorandum applies to all of our federal prosecutors and guides the exercise of prosecutorial discretion against individuals and organizations that violate any of our stated federal interests, no matter where they live or what the laws in their states may permit. Outside of these enforcement 3

5 priorities, however, the Department will continue to rely on state and local authorities to address marijuana activity through enforcement of their own drug laws. This updated guidance is consistent with our efforts to maximize our investigative and prosecutorial resources, and with the more general message the Attorney General has delivered to all federal prosecutors, emphasizing the importance of quality priorities for all cases we bring, with an eye toward promoting public safety, deterrence, and fairness. The August 29th memorandum itself did not expressly discuss what impact it would have on marijuana-related financial crimes. The February 14th memorandum states clearly that the provisions of the money laundering statutes, the unlicensed money remitter statute, and the Bank Secrecy Act (BSA) remain in effect with respect to marijuana-related conduct. The guidance advises federal prosecutors to assess marijuana financial crimes under the eight federal enforcement priorities laid out in the August 29th memorandum. The guidance also advises that financial institutions that service marijuana-related businesses, but are in clear compliance with Treasury Department s Financial Crimes Enforcement Network (FinCEN) regulations and FinCEN s February 14 guidance memo, are not likely to implicate the eight federal enforcement priorities. The Department expects financial institutions to continue to apply appropriate riskbased anti-money laundering policies, procedures, and controls sufficient to address the risks posed by these customers. This includes conducting customer due diligence consistent with any guidance issued by FinCEN. The Department s guidance also makes one overarching point clear: the Department of Justice expects that states and local governments that have enacted laws authorizing marijuanarelated conduct will implement effective regulatory and enforcement systems to protect federal priorities and the health and safety of every citizen. As the Department s guidance explains, a jurisdiction s regulatory scheme must be tough in practice, not just on paper. It must include strong enforcement efforts, backed by adequate funding. Consequently, financial institutions and individuals choosing to service marijuana-related businesses that are not compliant with such state regulatory and enforcement systems, or that operate in states lacking a clear and robust regulatory scheme, are more likely to risk entanglement with conduct that implicates the eight federal enforcement priorities. We emphasize comprehensive regulation and well-funded state enforcement because such a system will complement the continued enforcement of state drug laws by state and local enforcement officials, in a manner that should allay the threat that a state-sanctioned marijuana operation might otherwise pose to federal enforcement interests. Indeed, a robust system may affirmatively address those federal priorities by, for example, implementing effective measures to prevent diversion of marijuana outside of the regulated system and to other states, prohibiting access to marijuana by minors, and replacing an illicit marijuana trade that funds criminal enterprises with a tightly regulated market in which revenues are tracked and accounted for. In 4

6 those circumstances, consistent with the traditional allocation of federal-state efforts in this area, enforcement of state law by state and local law enforcement and regulatory bodies should remain a necessary part of addressing marijuana-related activity. For that reason, we in federal law enforcement in Colorado and Washington are working hard with our state and local enforcement partners to ensure that our efforts are mutually supportive. For the overall regulation of marijuana to be effective and public safety to be protected, state, local and federal law enforcement need to cooperate and work together. That s the message we have been sending, and will continue to send and to implement. III. Conclusion The Department of Justice is committed to enforcing the CSA in all states, and we are grateful for the dedicated work of our Drug Enforcement Administration agents, our federal prosecutors, and our state and local partners in protecting our communities from the dangers of illegal drug trafficking. In Colorado, the U.S. Attorney s Office and DEA work hand-and-hand in this effort, and work closely with state and local law enforcement in this area as well. Our goal is to ensure by that cooperation that we are effectively focused on the eight federal enforcement priorities outlined in the August 2013 and February 2014 guidance from the Department. And as a final note, the Department also remains committed to minimizing the public health and safety consequences of marijuana use, including support for prevention, treatment, and recovery programs. As our guidance reflects, we continue to target conduct that implicates federal priorities and causes harm, regardless of state law. We expect our state and local partners to continue to do so as well. In those jurisdictions that have enacted laws that legalize and seek to regulate marijuana for some purposes, this means that strong and effective regulatory and enforcement systems must address the threat those state laws could pose to public safety, public health, and other law enforcement interests. We look forward to taking your questions. 5

7 U.S. Attorney John F. Walsh, District of Colorado John Walsh has served as United States Attorney for Colorado since August 2010, after nomination by President Barack Obama and unanimous confirmation by the United States Senate. From 2011 to 2013 he served on the Attorney General s Advisory Committee (AGAC). In January 2012, he was named by the Attorney General to serve as one of five national co chairs of the Attorney General s Residential Mortgage Backed Securities ( RMBS ) Fraud Working Group. Walsh is also co chair of the AGAC s White Collar/Fraud committee. Mr. Walsh grew up in Denver. In 1986, he graduated with honors and Order of the Coif from Stanford Law School, where he was Senior Notes Editor of the Stanford Law Review. After graduation, he served as a clerk to the Honorable J. Skelly Wright of the U.S. Court of Appeals for the D.C. Circuit. From 1987 to 1995, Walsh served as an Assistant U.S. Attorney in the U.S. Attorney s Office in Los Angeles, California, where he prosecuted a broad range of federal criminal cases, including many complex federal white collar violations. Walsh participated in many notable white collar matters, including those of Charles Keating, Michael Milken, and Arizona Governor J. Fife Symington. From 1993 to 1995, he served as chief of the Major Frauds section of the U.S. Attorney s Office, and supervised 35 Assistant U.S. Attorneys prosecuting white collar offenses. In 1995, Mr. Walsh returned to Denver to join the law firm Holland & Hart, LLP, and became a partner in In 1999, he left the firm to join Hill & Robbins, P.C., where he was a member until 2010, when he became U.S. Attorney. His practice there focused on complex civil litigation and class actions in the areas of securities, antitrust and consumer protection, as well as internal investigations and white collar criminal cases. Walsh has been highly involved in Colorado community organizations. Until becoming

8 U.S. Attorney, Walsh served as chairman of the board of Invest in Kids, a Colorado nonprofit focused on the development and dissemination of evidence based early childhood education and health programs, and was a member of the board of the Colorado Lawyers Committee. In 2010, he received the Colorado Lawyers Committee s Sustained Contribution award. Prior to becoming U.S. Attorney, Walsh was listed for many years in Best Lawyers in America, Chambers USA 2010, and Colorado Super Lawyers, among other professional honors. Walsh lives in Denver with his wife Lisa Christian and their three children.

9 THOMAS M. HARRIGAN Deputy Administrator Thomas M. Harrigan was confirmed as the Deputy Administrator of the Drug Enforcement Administration by the United States Senate on March 29, 2012, following his nomination by President Obama in February As Deputy Administrator he is the chief operating officer of the DEA, overseeing all enforcement, intelligence, administrative, and regulatory operations, and is the principal advisor to the DEA Administrator. Mr. Harrigan began his career as a Special Agent with the Drug Enforcement Administration in 1987 in the New York Field Division. He coordinated enforcement efforts against the notorious Rodriguez Orejuela drug trafficking organization that led to the arrest and incarceration of several high ranking members of the Colombianbased cartel, and the seizure of tons of cocaine and illicit proceeds throughout the United States, Colombia, and Panama. In 1994, Mr. Harrigan was assigned to the Bangkok Country Office. While serving there, he directed an investigation that led to the identification and dismantlement of an organization responsible for the importation of multi kilogram quantities of heroin into the United States. This organization utilized dozens of U.S. citizens as couriers that smuggled heroin from Southeast Asia to Chicago. He left Bangkok in 1996 and was promoted to Group Supervisor in the Newark Field Division where he managed a Task Force group that was recognized by state and county officials for its significant enforcement achievements. He was reassigned to DEA Headquarters in 1999 where he served as a Staff Coordinator in the Office of Congressional and Public Affairs. In 2000, Mr. Harrigan was promoted to the Operations Division as Section Chief of the Dangerous Drugs and Chemicals Section where he oversaw a multi jurisdictional investigation that resulted in the largest LSD seizure in history. In 2001, he was reassigned as the Deputy Chief in the Office of Domestic Operations. During that time, he served as Senior Advisor to the Chief of Domestic Operations, assisting and providing oversight and direction to Domestic Operations Section Chiefs on a variety of budgetary and operational matters. He left the Operations Division in 2003 and reported as the Assistant Special Agent in Charge in the Washington Field Division with responsibility over High Intensity Drug Trafficking Area Task Forces, offices in West Virginia, and the Administrative and Special Support Units. In 2004, Mr. Harrigan was appointed to the Senior Executive Service to serve as the Chief of Enforcement Operations. In this role, Mr. Harrigan was the principal deputy for the Chief of Operations and directed the re organization of DEA s Operations Division. In 2009, he was appointed as DEA s Chief of Operations, responsible for leading DEA s global drug enforcement efforts in 227 domestic offices as well as 86 foreign offices in 67 countries, the Special Operations Division, the Aviation Division, the Training Division and the Office of Diversion Control.

10 Mr. Harrigan, a native of New York City, has a Master s Degree in Education from Seton Hall University and has attended a number of government, military, and private leadership courses including Duke University s Fuqua School of Business Leadership Program. Mr. Harrigan is married and has four children.

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